Dollar recovers some lost ground

The New Zealand dollar fell below A78c against the Australian dollar for the first time in more than five months overnight Friday, but managed to claw back some of its lost ground.

The kiwi also dropped to a two-month low against the United States dollar to US70.21c, according to Reuters data, but around 8am today was back up to US71.39c from US71.05c at 5pm on Friday.

Against the aussie, the NZ dollar was buying A78.20c at 8am, still down from the A78.60c at Friday's local close, but up from the A77.93c low.

BNZ Capital strategist Mike Jones said concerns about contagion effect from Dubai's request for a standstill on debt repayments were the dominant driver of currency markets towards the end of last week.

Plummeting risk appetite took a toll on growth sensitive currencies such as the NZ and Australian dollars as investors sought out the relative safe haven of the US dollar and the yen, Mr Jones said.

For the direction of the NZ dollar in the near term, much would depend on how sentiment in offshore markets evolved in response to the Dubai situation.

The NZ dollar also pulled back from a multi-month low against the Japanese currency reached around lunchtime on Friday.

From a 4-1/2-month low of 59.85 yen, the kiwi was up to 61.13 yen by 5pm Friday, and up to 62.23 by today's local open.

- NZPA